Out of Work Over 9 Months? Good Luck Finding a Job

Do the long-term unemployed face a stigma that keeps them from finding jobs? A new experiment suggests the answer is “yes” — at least for low-skilled workers.

The scourge of long-term unemployment has been one of the defining characteristics of the recession and slow recovery. More than three million Americans have been out of work for more than a year, a figure that leaves out millions of others who have given up looking for work because they can’t find jobs. Economists worry many of them will never work again.

Particularly troubling are suggestions that the long-term jobless bear a stigma that leads companies to reject otherwise qualified candidates. The National Employment Law Projecthas highlighted job postings that explicitly require applicants to be currently employed; many job-seekers have stories of interviews that ended shortly after the, “So, where are you working now?” questions.

Beyond such anecdotal evidence, however, economists have struggled to determine how big an issue the so-called scarring effect really is. There’s no question that workers who have been unemployed longer have a much tougher time finding work. But stigma is only one possible explanation for that pattern. Job seekers might lose hope over time stop searching as hard for work. Perhaps their networks break down over time, meaning they miss out on job opportunities because they hear about them late, or not at all. Or perhaps the best candidates get hired first, so the ones left in long-term unemployment are less attractive to employers for reasons unrelated to their joblessness. Economists have tried to isolate the various factors, with limited success.

Swedish economists Stefan Eriksson and Dan-Olof Rooth decided to test the theory head-on with a straightforward experiment. They applied for more than 3,500 jobs using nearly 8,500 fictitious resumes. Some of the made-up applicants had steady employment histories, some were currently employed but had been jobless at an earlier stage in their careers, and some were unemployed for various lengths of time. Then they waited to see who got called in for an interview. (The researchers quickly declined all interviews.)

In a forthcoming paper in the American Economic Review, the researchers find that short-term spells of unemployment (those of six months or less) had no effect on job-seekers’ prospects. In fact, for low-skilled jobs, being short-term unemployed may have even been a slight advantage, perhaps because the workers could start right away.

But for the long-term unemployed, it was a different story: “The callback rate decreases dramatically at nine months of unemployment,” the researchers write. For those applying for medium or low-skill jobs (those not requiring a college degree), being long-term unemployed reduced interview requests by 20%, the equivalent of shaving four years of work experience off their resumes.

Interestingly, the pattern didn’t hold for those applying for jobs requiring a college degree. The researchers speculate companies may have more rigorous hiring processes for higher-skill jobs, and therefore are less influenced by the contents of resumes themselves. (Of course, there’s no way of knowing how the fictitious candidates would have fared if they’d gone through the interview process.)

The good news for the long-term unemployed: If they can find work, the stigma of their joblessness should wash away fairly quickly. Resumes that revealed a year-long unemployment spell in the past got the same response as those with a consistent work history. “One year of work experience is enough to reverse the negative signal of one year of past unemployment,” the researchers conclude.

Messrs. Eriksson and Rooth conducted their experiment in Sweden, but they argue their results likely apply to the U.S. as well, which has a relatively similar job market in many respects. But there’s some evidence their conclusions may be optimistic. Northeastern University graduate student Rand Ghayad conducted a similar experiment in the U.S. last year. His research, which hasn’t yet been published, found that employers showed “a strong distaste for applicants with long spells of non-employment” — even when they had better experience than applicants who had been unemployed for less time.

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